The Australian Securities and Investments Commission is considering regulatory action over complaints handling failings after a review found insurers are not meeting obligations.

Insurers have failed to identify one in six customer complaints, systemic issues are not being noted, communication time frames continue to be missed and “immature” systems are not recording outcomes such as compensation payments.

The review of 11 insurers examined compliance with enforceable requirements outlined in ASIC’s internal dispute resolution regulatory guide (RG 271), released in September 2021.

Commissioner Alan Kirkland says the issues are disappointing, particularly because insurers were told to improve when ASIC examined claims handling after the 2022 Queensland and NSW floods.

“It’s time for insurers to step up and do what they should have done three years ago when these obligations commenced,” he said. “Insurers should prioritise building a positive complaints management culture that values and learns from customer complaints and prevents problems from recurring.”

ASIC will provide individual written feedback to participating insurers and ask them to prepare action plans outlining how they will respond, then follow up to ensure the actions are taken.

“We are considering further regulatory action in relation to some of the issues identified in this review,” the review report says. “More generally, we will continue to work with the insurance sector to drive behavioural change, particularly in complying with regulatory obligations and treating customers efficiently, honestly and fairly.”

The review covered January 1 2022 to March 27 this year, and involved analysis of more than 1.4 million complaints and 36.9 million data points. Meetings were held with more than 60 staff.

The participating companies were Suncorp’s AAI; Allianz Australia; Hallmark General Insurance Company; Hollard and Hollard Insurance Partners; IAG’s Insurance Australia Limited and its Insurance Manufacturers of Australia joint venture with RACV; QBE; RAA Insurance; RACQ Insurance; and Youi.

The report says several insurers have programs to improve complaints handling, some of which were started or expanded in response to the ASIC review, but effective implementation needs to be prioritised.

ASIC says failings include deficiencies in systems and processes, staff training and resourcing, but a key driver for the most serious issues is the absence of a positive complaints management culture.

Complaints is also a focus for the industry code of practice independent review, which has made recommendations in an initial report, and insurers are also responding to an industry-commissioned Deloitte report on the 2022 Queensland and northern NSW floods.

The Insurance Council of Australia says companies have been investing in system improvements, both human and digital, and the sector has been focused on lifting performance – including on complaints handling – in the face of larger, more frequent and more costly events.

“The performance of some insurers in this regard is noted by ASIC, but it is clear that others need to do better,” an ICA spokesperson told insuranceNEWS.com.au. “Any case where customer harm has taken place is unacceptable, and where that has occurred, those insurers will be focused on understanding why and how this took place and the system improvements that are needed in the face of these findings.”

ICA says senior industry stakeholders will consider ASIC’s report, and an initial industry response will be provided in coming weeks to code review and parliamentary inquiry recommendations. A Deloitte progress report will also be finalised in coming weeks.  

Consumer and financial counselling groups say they are unsurprised by ASIC findings that reflect the experience of advocates and people seeking help.

“It’s the latest in a large number of reports that demonstrate the insurance industry has a culture of denying claims and ignoring complaints,” Consumer Action Law Centre insurance policy expert Rose Bruce-Smith said. “People aren’t being served by the product they’re paying thousands for.”

Financial Rights Legal Centre director of casework Alexandra Kelly says one in six complaints not being identified demonstrates “either a head in the sand approach” to customer service or systemic ignorance of customer needs, and a misunderstanding of the consumer experience.

“How many more reports are needed for insurers to begin making the investments and changes they need to make the services and products they provide fit for purpose? The time for action from the insurance sector is now,” Ms Kelly said.

Financial Counselling Australia says many counsellors have become so frustrated they lodge cases with the Australian Financial Complaints Authority at the same time as approaching the insurer.

“Our advice is that if you do complain, make sure you are very, very clear in the language you use. Say something like, ‘I want to make a formal complaint,’ because if you are not direct, they may not pick up on the cues,” FCA insurance expert Vicki Staff said.